Is the Recovery Creating the Good Paying Jobs We Need?

Today’s Labor Department report revealed that job growth continued to be the most solid part of the American—and even the global—economy. However, industries with low-wages continue to lead the recovery, making American workers less satisfied than expected after a record seventy-three straight months of private sector job growth.

Job growth in March continued at the same steady clip it has throughout 2016, with the 215,000 jobs gained in March coming in line with what we saw in January and February. The increase in jobs is only slowly adding pressure to wages overall, with hourly wages edging up by $0.07 in March, which is equivalent to a modest 2.3 percent increase in wages over the past year. Americans are pocketing these wage gains (which exceed inflation), but wages could be growing much faster given the tightening of the job market.

It’s clear now that job growth is driving the economy, with personal consumption edging up the estimates for fourth quarter GDP. More people working with more money equates to further economic growth. But the impact on the economy and the confidence of the American electorate would be elevated if the quality of jobs were better. The graph below breaks down job growth by industry over the last year. As we reach deep into the recovery, the economy should be producing more well compensated jobs. However, industry groups growing at an above average rate over the last year are paying workers $23.19 per hour on average, which is 22 percent less than in slower growth industries. Take the leisure and hospitality sector, which has added 450,000 new jobs over the last year, but only pays a paltry $14.60 per hour and low-paid retail jobs ($17.74 per hour). It is well know that the job growth has grinded to a standstill in the high paid manufacturing ($25.58 per hour) and mining sector ($31.51 per hour). Other high paying industries like information and finance are also lagging.

These patterns of industrial expansion are an infrequently discussed driver of slower than desired overall wage growth. As pointed out by one observer, perhaps one reason that more Americans are quitting their jobs (10.5 percent of the unemployed in March) than at any point since 2008 is the fact that the job market is improving and they are quitting with the hopes of finding something better than what is being offered in the fastest growing parts of the economy.

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While the quality of jobs being created is not optimal, the economy continues to pull workers back into the job market. As I reported on last month, labor force participation (not the unemployment rate) remains the big story in the job market. Employers continue to pull more Americans off the sidelines and into the job market, as labor force participation rate inched up to 63.0 percent and the employment population ratio (the proportion of all adults with a job) hit its highest level since March 2009 (59.9 percent.) Labor force participation is still well off from its pre recession peak of 66 percent, indicating that the unemployment rate continues to understate how far the economy is from full employment.

There is still much room for improvement in the jobs market, buried in today’s report. For example 27.6 percent of those out of work now have been unemployed for more than six months—in a strong economy fewer than one in five jobless individuals would be out of work after regular unemployment benefits expire. Unemployment among people of color also ticked up, with African Americans (9.0 percent) and Hispanics (5.6 percent) both yet to fully enjoy the recovery. As we look toward the rest of 2016, we should eye increased and more diverse job creation that can start raising the fortunes of all Americans.